Economic Perspective: How Are We Doing?

MARY WALDEN:

“Today’s program asks, ‘How are we doing?’ Mike, there appears to be a general feeling that many households are stuck economically. They simply are not seeing their standard of living improve. Do the numbers support this?”

MIKE WALDEN:

“It depends on what you look at. If you look at average wages and salaries, and of course that’s where a lot of people focus, the answer would be yes. Over the last, roughly, 20 years when you factor in cost of living increases most households have not seen an increase in what we call their after-inflation wages or salaries.”

“But if we look at what we’re able to buy, and how much we’re able to buy with our money then we have a little more nuanced result. A study from the National Bureau of Economic Research looked at this. For example, it found that if you look at the number of vehicles per household, and you look at all income ranges, that went up from 1960 to 1990, but it’s really stalled since then. So that would fit in with the income changes.”

“Same thing for households with indoor plumbing, although I should say that hit virtually 100 percent in 1990. However, if you look at consumption of housing. If you look at, for example, the number of bedrooms the average household has in their home that’s continued to trend upward (even past 1990). Same with the number of bathrooms per household. That’s continued to trend up continuously from 1960 to 1990 to today.”

“So it looks like yes, we’ve seen a stall in income, yes we’ve seen a stall in some other areas, but in terms of housing, what people are able to buy in terms of housing (bedrooms and bathrooms or rent in terms of housing) is continuing to improve over the last recent decades.”

Walden is a William Neal Reynolds Distinguished Professor and Extension Economist in the Department of Agricultural and Resource Economics at North Carolina State University who teaches and writes on personal finance, economic outlook, and public policy.